Monday, 25 July 2011

Curis Resources is a potential takeover target, says Salman Partners

The beat on copper explorer Curis Resources (CVE:CUV) is definitely positive, as analysts including Salman Partners have labeled the company as a potential takeover target.

On Thursday Freeport McMoRan's (NYSE:FCX)  better-than-expected second quarter results created a positive momentum for copper equities, including Curis, whose flagship Florence project is the in-situ leach copper property in Arizona.

The 3+ billion pound development-stage property in central Arizona is located roughly 65 miles southeast of Phoenix. The asset is unique, as its in-situ leach production plan, as opposed to conventional open pit, stands to benefit from buoyant copper prices, while at the same time delivering low capex and operating costs.

This is because in-situ leach recovery of copper does not require mining trucks, milling equipment, or even mining engineers, nor does it necessitate waste stripping or exposure to long-lead time equipment.

The process involves drilling holes to a zone of copper oxide minerals that is saturated with water, and then pumping dilute acid through the mineralized zone, recovering copper from the returning fluids. Cash costs for the project are expected to be well under US$1.00 per pound, and with highlights like these, Salman noted that Curis could be a target for an acquisitor such as Vale SA, due to the growing hunger for copper projects of any description, and other companies' interests in gaining access to a technology that could open other copper deposits. 

Late last week, Curis provided an update on its status with Florence, stating it is on track to start phase one construction of the property in early 2012, with a targeted feasibility study set for the fourth quarter of this year, which will compile a number of engineering studies.

"We are pleased with our progress in advancing the Florence Copper project with the goal of completing the feasibility study and necessary amendments to permits to enable near term production," said Curis chief executive, Michael McPhie.

Phase one construction of the project is planned to start in the first quarter of next year, after it receives amended commercial operating permits currently being reviewed by state and federal agencies, on track for completion later this year or early next.

The start-up phase will consist of a 24-well copper extraction field, constructed to simulate full scale operations, for inputs into final plant design and development.

Presently, a drilling program is also underway at the property, having initiated a six-hole 8,000 foot core drilling program back in April. The program comprises of three holes in the phase one development area, of which two holes are on Arizona State land, with one in the area of the former BHP copper in-situ recovery well operated in 1997. Curis expects the drilling program to be done by early August.

The company also anticipates full commercial production for Florence to be reached in early 2014. Salman, however, concluded that its $5.75 target price and "buy" rating for Curis is based on the assumption that production does not begin until 2016, meaning the copper explorer could be worth more at an even faster rate. Curis is currently trading at a price of $2.31, giving it plenty of upside potential.

The Arizona property, with permits on the way, showed robust economics in a 2010 preliminary economic assessment report. Florence was estimated to have a 19 year operation, with roughly 72.7 million pounds of copper production per year, and cash costs of US$0.77 per pound, including royalties.

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